Hello,

I am trying to open futures trading accounts for my IRA and profit sharing plan (single participant plan) so that they may be traded by CTAs. The brokerage says I must sign a personal guaranty on the accounts. I am concerned that this may create a prohibited transaction. The brokerage claims thousands of people have signed them. Is there an issue here? I'd appreciate any insight.

I am cross-posting this to the IRA board. I don't find a board on defined contribution plans.

Thanks,

Tom

Hello,

I am trying to open futures trading accounts for my IRA and profit sharing plan (single participant plan) so that they may be traded by CTAs. The brokerage says I must sign a personal guaranty on the accounts. I am concerned that this may create a prohibited transaction. The brokerage claims thousands of people have signed them. Is there an issue here? I'd appreciate any insight.

I am cross-posting this to the Investment board. I don't find a board on defined contribution plans.

Thanks,

Tom

I have a basic SH match paid monthly and I thought it would be easy to make sure everyone received the correct match by printing the ADP and ACP test. But the SH match doesn't show up on the ACP test. Anyone know a good report on RA or a workaround?

Hello,

I am trying to understand why it is that all the brokers I talk to will not permit short selling in an IRA nor in a profit sharing plan. They claim there are IRS and SEC regulations prohibiting it but cannot supply specific citations. Meanwhile I have located a revenue ruling (95-8) and PLRs in which the IRS has held that borrowing stock does not create acquisition indebtedness and UBTI. There is also a DOL class exemption (Prohibited Transaction Exemption PTE 75-1) that permits short selling. Can anyone tell me where in the law it states that short selling is prohibited?

I am cross-posting this to the IRA/Roth IRA board. I don't find a board related to defined contribution plans.

Thanks,

Tom

Hello,

I am trying to understand why it is that all the brokers I talk to will not permit short selling in an IRA nor in a profit sharing plan. They claim there are IRS and SEC regulations prohibiting it but cannot supply specific citations. Meanwhile I have located a revenue ruling (95-8) and PLRs in which the IRS has held that borrowing stock does not create acquisition indebtedness and UBTI. There is also a DOL class exemption (Prohibited Transaction Exemption PTE 75-1) that permits short selling. Can anyone tell me where in the law it states that short selling is prohibited?

I am cross-posting this to the Investment Issues board. I don't find a board related to defined contribution plans.

Thanks,

Tom

My plan already offers a 50% & 100% J&S option for which we have printed tables. J&S 50 is the normal form. My problem is that the records are so old, nobody seems to know where the tables originated. They don't match any standard tables so it seems long ago an in-house actuary developed them. Rather than spend a pile of money to have someone recreate, can I just amend the normal form to J&S 100 and leave things as they are?

Calendar year Plan uses current year for ADP & ACP and uses full-year compensation for testing. Want to change from full-year comp to participation comp (compensation while eligible to defer) for the 2008 ADP & ACP tests. Is a change in the definition of testing compensation permissible in mid-year? I don't see any cut-back issues--other than a potential return to an HCE that might not be returned if full-year comp were used in testing. Is there something I'm overlooking?

SE had 60k earned income for 2007.

Min contribution for 2007 was $100k resulting in $40k undeducted contribution.

In the past i would have reduced the 404 assets by the $40k to calculate the max NC (Ind Agg), but the 412 assets would not have been reduced. Similar for the FFL.

I thought I would reduce the assets by the $40k when determining the max for the 01/01/2008 valuation, but the max contribution refers to 430(g).

What am I overlooking?

[iRC §404(o)] `(2) DETERMINATION OF AMOUNT-

[iRC §404(o)(2)] `(A) IN GENERAL- The amount determined under this paragraph for any plan year shall be equal to the excess (if any) of--

`(i) the sum of--

`(I) the funding target for the plan year,

`(II) the target normal cost for the plan year, and

`(III) the cushion amount for the plan year, over

`(ii) the value (determined under section 430(g)(2)) of the assets of the plan which are held by the plan as of the valuation date for the plan year.

[iRC §430] `(g) Valuation of Plan Assets and Liabilities-

[iRC §430(g)] `(1) TIMING OF DETERMINATIONS- Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date of the plan for such plan year.

[iRC §430(g)] `(2) VALUATION DATE- For purposes of this section--

`(A) IN GENERAL- Except as provided in subparagraph (B), the valuation date of a plan for any plan year shall be the first day of the plan year.

`(B) EXCEPTION FOR SMALL PLANS- If, on each day during the preceding plan year, a plan had 100 or fewer participants, the plan may designate any day during the plan year as its valuation date for such plan year and succeeding plan years. For purposes of this subparagraph, all defined benefit plans (other than multiemployer plans) maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only participants with respect to such employer or member shall be taken into account.

`© APPLICATION OF CERTAIN RULES IN DETERMINATION OF PLAN SIZE- For purposes of this paragraph--

`(i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into account the number of participants that the plan is reasonably expected to have on days during such first plan year.

`(ii) PREDECESSORS- Any reference in subparagraph (B) to an employer shall include a reference to any predecessor of such employer.

[iRC §430(g)] `(3) DETERMINATION OF VALUE OF PLAN ASSETS- For purposes of this section--

`(A) IN GENERAL- Except as provided in subparagraph (B), the value of plan assets shall be the fair market value of the assets.

`(B) AVERAGING ALLOWED- A plan may determine the value of plan assets on the basis of the averaging of fair market values, but only if such method--

`(i) is permitted under regulations prescribed by the Secretary,

`(ii) does not provide for averaging of such values over more than the period beginning on the last day of the 25th month preceding the month in which the valuation date occurs and ending on the valuation date (or a similar period in the case of a valuation date which is not the 1st day of a month), and

`(iii) does not result in a determination of the value of plan assets which, at any time, is lower than 90 percent or greater than 110 percent of the fair market value of such assets at such time.

Any such averaging shall be adjusted for contributions and distributions (as provided by the Secretary). [JCX-38-06 explanation]

Employer will soon be adopting a program whereby they will be providing employees some compensation for educational purposes. The specifics of who would qualify and what they consider "educational purposes" are unknown to me at this time. But they did say it would be for employees OR family members.

Their Plan currently uses a safe harbor definition for comp. and excludes fringe benefits. They want to exclude any payments made for educational purposes from their definition of compensation.

IRS Pub 15-B describes fringe benefits for educational assistance as being for the "Employee." Do you think this form of "compensation" paid to the employee could be considered a fring benefit falling within the safe harbor fringe exclusion? Or would the fact that it could be for the employees family member preclude it from being considered a fringe benefit within 15-B?

We have a church in which the ministers are enrolled in the 403B plan through the denomination. The non ministerial staff has also been receiving a 12% contribution to the 403B plan. They are reviewing this plan for changes. Would it be possible for the non ministerial staff to open a SEP IRA account for the local church and exclude the ministers? The ministers may want to remain with the current 403B plan because of better benefits they receive.

The SAR states that participants may examine or receive copies of statements from the regulated financial institutions that hold the plan assets.

Plan is not participant directed and invests in 7 different brokerage accounts.

Does any participant, at any time, have the right to ask to examine or to get a copy of the monthly statements? Could they ask for a copy every month? Could they ask for copies of statements for previous years? Can the plan administrator require that the participant examine the copies only at the plan administrator's office?

Thank you.

Kate Smith

We have 5 businesses each with their own separate 401(k) plans.

There are 4 owners who have more than a 5% share in some of the businesses.

Owners include:

A is an owner in 3 of the 5.

B is an owner in all of the businesses.

C child of A, owner in 2 of the 5.

D is an owner in one of the businesses.

Businesses include:

1 is owned by A and B. A and C are participants in this plan.

2 is owned by B and C.

3 is owned by B (and others with less than 5% share)

4 is owned by A, B, and C. B and D are participants in this plan.

5 is owned by A, B, and D.

How would you handle the ADP/ACP testing in this situation? Would we have to aggregate all plans into one?

Sorry if I left something out, I'm new to this.

Is an ESOP holding shares of an S-Corporation permitted to convert the accounts of former participants into cash immediately upon the participants' termination of employment eventhough the participants aren't entitled to distributions for five years?

In 2000, there were two posts on the message boards which dealt with this issue. However, at that time, the only guidance in the area seemed to be a 1999 article in the Journal of Taxation, but no IRS guidance. I was told that the IRS had issued guidance with regard to the above issue sometime in the last few years. Is anyone aware of this guidance?

I understand that many ESOPs have included similar force-out provisions on the reliance of their favorable determination letters. I've also learned that this issue has twice been the topic of breakout sessions during the annual ESOP association meeting.

Can anyone help bring light to this issue?

I have a new plan that is setting up profit sharing effective as of 1/1/08 and 401k as of 8/1/08. 3% SHNEC is going to be used as of 8/1/08. When calculating the 3%, do I use comp for entire year, or just portion of year from 8/1/08 forward? Having a "brain went on vacation" moment.

Company leases office space from an LLC that is 50% owned by the company's 401(k) plan. The specific nature of the plan investment is via the individual brokerage accounts of the company's 2 principals. Original plan investment was $150,000; LLC is now worth essentially what the building is worth (approx. $3 million). Total plan assets = about $2 million.

Company pays FMV for lease with built-in increases based on area Consumer Price Index. Leased space represents 25% of building space. Other tenant rents on similar terms. Although the lease is not directly between the plan and the plan sponsor, indirect PT would appear to exist under reasoning set forth in DOL Advisory Opinion 2006-01A (which involved IRAs, admittedly).

Is it sufficient to cure the PT that the plan sponsor gets out of the lease and leases elsewhere? If so, and presuming FMV rent, what damages to the plan, if any, did the PT cause? Is there any reason the principals should divest their LLC investment, other than to avoid annual cost of an independent appraisal of the LLC interest?

Is an ESOP holding shares of an S-Corporation permitted to convert the accounts of former participants into cash immediately upon the participants' termination of employment eventhough the participants aren't entitled to distributions for five years?

In 2000, there were two posts on the message boards which dealt with this issue. However, at that time, the only guidance in the area seemed to be a 1999 article in the Journal of Taxation, but no IRS guidance. I was told that the IRS had issued guidance with regard to the above issue sometime in the last few years. Is anyone aware of this guidance?

I understand that many ESOPs have included similar force-out provisions on the reliance of their favorable determination letters. I've also learned that this issue has twice been the topic of breakout sessions during the annual ESOP association meeting.

Can anyone help bring light to this issue?

What is the distinction between employer contributions to a 457(b) plan and a 401(k) plan that makes the employer contributions to a 457 reportable as earnings and taxable for FICA/Med/FUTA but not employer contributions to a 401(k) plan?

I'm attaching a copy of IRS Notice 2003-20 that seems to indicate that employer contributions to 457(b) plans are included as earnings and subject to FICA/Medicare. I don't see anything that indicates that the same might be true for employer contributions to a 401K are similarly subject to those reporting requirements but I don't want to assume that to be the case.

Can someone please explain what is behind this apparent difference?

457B_IRS_Guidelines.pdf

What is the distinction between employer contributions to a 457(b) plan and a 401(k) plan that makes the employer contributions to a 457 reportable as earnings and taxable for FICA/Med/FUTA but not employer contributions to a 401(k) plan?

I've attached a copy of IRS notice 2003-20 for reference. See section VI - pp 9-12.

457B_IRS_Guidelines.pdf

Are 401(k) catch-up contributions considered along with deferrals, match, & profit sharing allocations when aggregating with a DB for the General Test ?

I am working on a DB plan that had a change in eligibility back in 2001, so some employees entered with no service requirement and others had a 2 year service require. The entry age that has been used for several years in the past to calculate the EANC and EAAL is the age at participation as if the current 2 year eligibility rules had always been in effect. I know that the employment age can be used or the participation age can be used, but can find nothing that tells me that this method is acceptable. Any thoughts?